Ministerial Salaries

Standard Note: SN/PC/04757 Last updated: 25 June 2008 Author: Richard Kelly Parliament and Constitution Centre

This Standard Note sets out the background to and effect of the Ministerial and other Salaries Order 2008, which was laid before both Houses of Parliament in draft on 2 June 2008.

It provides for ministers’ and other office holders’ salaries to increase in line with the increase in Members’ pay for 2007/08 that was agreed by Resolution of the House of Commons on 24 January 2008.

On 5 June, the House of referred it to Grand Committee for debate on 17 June 2008; it was subsequently approved on the floor of the House on 23 June.

The Third Delegated Legislation Committee in the House of Commons considered the Order on 23 June 2008. It was formally approved on 24 June.

The Order still requires the final approval of the Privy Council before it takes effect.

Contents

A. Background 2 B. Effect 4 C. Parliamentary proceedings 4 1. Joint Committee on Statutory Instruments 5 2. Written ministerial statement on ministers’ pay from 1 April 2008 6 3. House of Commons 7 4. 8 D. Deputy Speakers 9 Appendix: Ministerial and other Salaries Order 2008 and Explanatory Notes 10

A. Background

On 1 April 2007, Members’ and Ministers’ salaries increased by 0.66 per cent, in accordance with the formula set out in the Resolution of July 1996 on Members’ salaries and the identical formula in the Ministerial and other Salaries Act 1975:

(1) For each year starting with 1st April, from 1998 onwards, the annual amount, or maximum or minimum annual amount, of any salary payable under [section 1(1), (3) or (3A)] of this Act shall be increased by the relevant percentage. (2) The relevant percentage is the average percentage by which the mid-points of the Senior Civil Service pay bands having effect from 1st April of the year concerned have increased compared with the previous 1st April. (3) The mid-point of a Senior Civil Service pay band is the point half way between the maximum and the minimum.1

At the time, the Senior Salaries Review Body was conducting a review of Members’ pay and allowances.

The SSRB reported to the Prime Minister in July 2007 and its report was published in January 2008.2 The SSRB recommended that the 0.66 per cent should be increased to 2.56 per cent for Members, and that Ministers’ salaries should rise faster to compensate for the “compression of ministerial salaries over time”.3 It recommended revisions to the formula and additional payments to Members and Ministers for the next three years as their pay had fallen slightly behind comparators.

The Government accepted in part the recommendation on Members’ pay for 2007/08. However, it proposed that the increase should be staged because it wanted to keep public sector pay increases below 2 per cent. On 24 January 2008, the House agreed to the Government’s proposals for the staged pay increase for 2007/08,4 and supported the Government’s plan to refer the question of Members’ pay to an independent review by Sir John Baker, rather than implement the SSRB’s recommendations for the future.

In a written ministerial statement, , the Leader of the House announced that the Government rejected plans for Ministers’ salaries to rise more quickly than Members’ salaries and that they should rise at the same rate as Members’ salaries.5 However, as the formula to increase Ministers’ salaries is enshrined in the Ministerial and other Salaries Act 1975, it was not possible to implement that proposal immediately.

1 Ministerial and other Salaries Act 1975 (chapter 27), section 1A; this section was added to the 1975 Act by the Ministerial and other Salaries Act 1997 (chapter 62), section 1 2 Review Body on Senior Salaries, Review of parliamentary pay, pensions and allowances 2007, January 2008, Report No 64, Cm 7270, http://www.ome.uk.com/downloads/Review%20of%20Parliamentary%20pay%202007%20volume%201.pdf.p df 3 Ibid, para 4.4; see paras 4.1-4.11 and Recommendation 10 4 Members’ salaries rose by a further 0.84 per cent from 1 April 2007 and a further 1.06 per cent from 1 November 2007, giving the total of 2.56 per cent increase, when Members’ November 2007 salaries were compared with November 2006 salaries 5 HC Deb 16 January 2008 c34WS The Ministerial and other Salaries Order 2008 provides for this increase but the increase will only be backdated for ministers who were in post in 2007/08 and are still in post when the Order comes into effect. (A copy of the draft Order and the Explanatory Notes are appended to this Standard Note.)

Although Members’ pay increase has been deferred until the completion of the Baker review, the formula providing for the annual uprating of ministerial salaries in April 2008, in section 1A of the Ministerial and other Salaries Act 1975 is still operative.

Once the Government publishes the Senior Salaries Review Body’s annual report on Senior Salaries, the figure to be used in the formula that determines ministerial pay increases will be available. In the past, the Prime Minister has announced the publication of the SSRB’s annual report on Senior Salaries in a written ministerial statement.6

The following ministers and office holders are entitled to a salary under the provisions of the 1975 Act:

• The Speaker of the House of Commons • The Chancellor • The Speaker of the House of Lords • The Prime Minister • The Chancellor of the Exchequer • Secretary of State • Lord President of the Council • Lord • Chancellor of the Duchy of Lancaster • • Chief Secretary to the Treasury • Parliamentary Secretary to the Treasury • Minister of State • Financial Secretary to the Treasury • Attorney General • Solicitor General • Advocate General for • Parliamentary Secretary • Whips (with various formal titles) • Leader of the Opposition • Chief Opposition Whip • Two Assistant Opposition Whips • Leader of the Opposition (Lords) • Chief Opposition Whip (Lords)

6 e.g. HC Deb 2 March 2007 cc110WS-112WS Schedule 1 (Part V) limits the number of salaries that may be paid.7

B. Effect

In November 2006, the annual salary of a Member of Parliament was £60,277. In April 2007, as a result of the application of the formula linking Members’ pay to that of civil servants, it increased to £60,675.

On 24 January 2008, the House agreed to a motion to increase Members’ salaries that was expressed in the following way:

the yearly rate for salaries of Members of this House, including the additional salaries of chairmen of select and general committees, should be increased (in addition to the increase of 0.66 per cent. provided for in respect of the year starting with 1st April 2007 under the resolution of 10th July 1996 relating to Members’ Salaries (No. 2))—

(a) with effect from 1st April 2007, by 0.84 per cent. of the rate as it stood on 31st March 2007, and

(b) with effect from 1st November 2007, by a further 1.06 per cent. of the rate as it stood on 31st March 2007.8

Consequently, Member’s salaries were further increased as follows: from 1 April 2007 £61,181 from 1 November 2007 £61,820

The additional salary of a ministers and office holders increased in line with the formula. The additional salary of a Cabinet Minister is given for illustrative purposes. In November 2006, that salary was £76,400. It increased to £76,904 with effect from 1 April 2007.

If the Ministerial and other Salaries Order 2008 is approved Cabinet Minister’s salaries for 2007/08 will be increased to: from 1 April 2007 £77,546 from 1 November 2007 £78,356

The formula increase for ministerial salaries, which was due on 1 April 2008 will provide for the salary that pertained on 1 November 2007 to be increased.

C. Parliamentary proceedings

The Ministerial and other Salaries Act 1975 provides for changes to the formula and other changes to ministerial salaries to be made by Orders in Council that are subject to the affirmative resolution procedures in both Houses of Parliament:

7 For details see House of Commons Library Standard Note SN/PC/3378, Limitations on the number of Ministers and the size of the Payroll Vote, http://www.parliament.uk/commons/lib/research/notes/snpc- 03378.pdf 8 HC Deb 24 January 2008 cc1653-1720 (1) Her Majesty may from time to time by Order in Council make provision for changing the annual amount, or maximum or minimum annual amount, of any salary payable under section 1 of this Act.

(2) An Order in Council under subsection (1) above may— (a) specify a new amount, or (b) provide for an amount to be determined, or to change from time to time, by reference to another amount or a specified formula.

(3) An Order in Council under subsection (1) above may— (a) make different provision for different circumstances, and (b) make amendments to this Act.

(4) No recommendation shall be made to Her Majesty to make an Order in Council under subsection (1) above unless a draft of the Order has been approved— (a) by resolution of each House of Parliament, or (b) in the case of a draft which relates only to the salary of the Speaker of the House of Commons, by resolution of that House.9

Accordingly the draft Order in Council was laid before both Houses of Parliament on 2 June 2008.

The draft Order in Council would have automatically been referred to the Joint Committee on Statutory Instruments.

1. Joint Committee on Statutory Instruments

The Joint Committee on Statutory Instruments considered the draft Ministerial and other Salaries Order 2008, at its meeting on 11 June 2008. It reported the instrument to both Houses for “purported retrospective effect”:

The Committee draws the special attention of both Houses to this draft Order on the ground that it purports to have retrospective effect where the parent statute confers no express authority so to provide [emboldened in the original].10

The Joint Committee reviewed the parent act, the draft order, its effects, the explanatory memorandum and a memorandum from the Government. It drew the following conclusions:

1.10 We considered that in view of the effects of the Order [First, it increases the salary payable for the 2007-08 financial year. Secondly it alters the amount of the increases of salary for the 2008-09 financial year for which section 1A of the 1975 Act has provided (by reference to the current salaries)] the acknowledgment in paragraph 3.1 of the EM, that the Order could "arguably" be viewed as retrospective, was somewhat modest. The subsequent memorandum contains a more realistic assessment of retrospectivity.

9 Ministerial and other Salaries Act 1975 (chapter 27), section 1B 10 Joint Committee on Statutory Instruments, Twenty-first Report – Drawing Special attention to Draft Ministerial and other Salaries Order 2008 …, 13 June 2008, HC 38-xxi 2007-08, para 1.1 1.11 We consider that the Order purports to have "retrospective effect", as understood for the purposes of our orders of reference. We are aware of only one previous Order under the 1975 Act with a retrospective effect beyond the start of the financial year in which it was made. That Order related to one salary only (that of the Attorney General). We accept the point made by the that some backdating of salary increases in the public sector is now common practice. Backdating increases to nearly all of the salaries payable under the 1975 Act by more than 15 months is not common practice. This Order gives effect to increases announced in a Written Ministerial Statement following the publication on 16th January 2008 of a Report of the Senior Salaries Review Body. The unusual nature of this Order arises from the delay since that Statement.

1.12 The Order is detrimental not to individuals, but to those who must pay the increased salaries; and those salaries are paid out of public funds. And since the retrospective element of the Order applies only to those who remain office holders when the Order comes into force, the Order might have been framed (achieving a broadly similar effect) so as to increase salaries for those office holders for a future period to compensate for earlier "underpayment". This would not have been retrospective, but would have been more complicated and less transparent.

1.13. Nevertheless, we consider that both Houses should be made aware that the parent statute makes no express provision for retrospectivity and we report accordingly.11

2. Written ministerial statement on ministers’ pay from 1 April 2008

On 17 April 2008, the Prime Minister announced the publication of the SSRB’s Thirtieth Report on Senior Salaries 2008. In the same written ministerial statement, he also announced that:

Ministers’ pay is automatically linked to the average increase in the midpoint of SCS pay, which moves in line with SSRB recommendations. However, given the importance of public sector pay restraint at a time of economic uncertainty Ministers will not be accepting any pay rise in 2008-09.

There is no longer a link between the SSRB’s recommendations and the pay of Members of Parliament as there has been in previous years. My right hon. Friend the Leader of the House of Commons is making a statement today on the report into parliamentary pay and allowances, conducted by Sir John Baker, CBE.12

In a press briefing on the report on parliamentary pay and allowances, conducted by Sir John Baker, the Leader of the House of Commons, Harriet Harman, confirmed that had the award been made, it would have been worth 0.28 per cent:

Q: Surely MPs get a further 0.28% increase due to the SSRB’s recommendations and the existing formula?

11 Ibid, paras 1.10-1.13 12 HC Deb 17 June 2008 cc47WS-48WS A: No. The Resolution of the House on 24 January removed the previous automatic increase mechanism that linked MPs pay to movements in the SCS pay bands.13

The Prime Minister’s Official Spokesman addressed some questions on the decision at the morning press briefing on 17 June:

Asked if Ministers had all individually accepted that they would not get a pay rise in 2008/09, the PMS said that the Cabinet decided this morning that Ministers should not accept a pay rise.

Asked if there was a vote, the PMS said things did not normally go to vote at Cabinet, but that there was unanimous agreement this morning that this was the right thing to do.14

The decision to freeze ministerial salaries in 2008/09 was widely reported in the press. For example, The Times reported that the decision had been criticised and that it would apply to the office holders of the Official Opposition (Conservative Party) who receive salaries under the Ministerial and other Salaries Act 1975:

A senior minister described Mr Brown's surprise move on ministerial pay as "gesture politics of the worst kind". Mr Brown was inviting ministers to wear a hair shirt as a stunt, the minister said.

The idea that it would make other public-sector workers limit their pay rises was "cloud cuckoo land". "Nobody asked us, nobody consulted us," the minister added.

Mr Brown announced the freeze at yesterday's Cabinet meeting. He said that ministers would not accept a pay rise "given the importance of public-sector pay restraint at a time of economic uncertainty". Ministers will still receive the general MPs' pay rise.

David Cameron and a few senior Conservatives who receive ministerial salaries are also to forgo the rise to which they are entitled this year.15

3. House of Commons

The Third Delegated Legislation Committee considered the draft Order in Council on 23 June 2008.16 The Committee agreed to the question that it had considered the Order without a division. During the short debate on the Order, Sir Robert Smith, for the liberal Democrats, questioned why it had taken from 16 January, when the Government announced its plans for ministerial salaries in 2007/08, until June to bring forward an order that was “only a page and a half long”. He suggested that the concerns about the retrospective

13 Leader of the House of Commons, Question and Answer Briefing on Parliamentary Pay and Pensions, http://www.commonsleader.gov.uk/files/word/Q&A.doc 14 Number 10 Downing Street, Morning press briefing from 17 June 2008, http://www.number10.gov.uk/output/Page15796.asp 15 Philip Webster and Siobahn Kennedy, “Brown faces revolt after pay freeze on ministers”, Times, 18 June 2008 16 3rd DLC 23 June 2008 cc2-6 nature of the Order would have been “far more limited had it been advanced more urgently”.17

Helen Goodman, the Deputy Leader of the House, explained that the decision taken in January had to apply to salaries with effect from 1 April 2007 and that the question of how to apply the Order only to current ministers also needed consideration.18

The House approved the Order on 24 June 2008, without a division.19

4. House of Lords

On 5 June, the House of Lords agreed to refer the draft Order in Council to its Grand committee for debate.20 It is scheduled to be debated there on 17 June 2008.21 It returned to the floor of the House of Lords where it received formal approval on 23 June 2008.22

During the brief Grand Committee debate, Lord Davies of Oldham explained why the Order had been introduced:

The order gives effect to the government policy set out in the Written Ministerial Statement of 16 January this year, following the publication of the report of the Senior Salaries Review Body on parliamentary pay and allowances. The policy as expressed in that Statement is that ministerial salaries should increase at the same rate as for Members of Parliament.

He also noted the Joint Committee on Statutory Instruments’ comments on the retrospectivity of the Order:

As highlighted in that Committee’s report, the Government accept that the order is retrospective. Nevertheless, the Government believe that the general presumption that powers delegated in enactments are not capable of being exercised retrospectively is outweighed by other factors in this case. In particular, some backdating of salaries is now common practice, especially in the public sector, due to the timings of negotiated pay settlements.23

In response to a question from Lord Shutt of Greetland about the link between the Prime Minister’s announcement of a ministerial pay freeze for 2008/08 and the Order, Lord Davies made the following comments:

This order relates to 2007-08. …

The pay freeze applies to this year, 2008-09. The Cabinet agreed this morning that Ministers will not take a pay increase this year … Ministers will not be the beneficiaries of any increase that Members of Parliament vote themselves on such an

17 3rd DLC 23 June 2008 c4 18 3rd DLC 23 June 2008 cc4-5 19 HC Deb 24 June 2008 c260 20 HL Deb 5 June 2008 c265 21 HL Deb 17 June 2008 ccGC384-GC388 22 HL Deb 23 June 2008 c1230 23 HL Deb 17 June 2008 cGC384 occasion because of this self-denying ordinance for this year to illustrate the determination of the Government to control public sector pay in the battle against inflation.24

D. Deputy Speakers

The Ministerial and other Salaries Act 1975 does not include any provisions on the salaries paid to the three Deputy Speakers of the House of Commons. This was noted during the passage of the Ministerial and other Salaries Bill 1971-72, which became the Ministerial and other Salaries Act 1972; and was in turn replaced by the 1975 Act. However, at the time, the Government explained that this omission would not prevent the Deputy Speakers from receiving an enhanced salary.

Fred Peart, the Shadow Leader of the House, noted the omission:

Before I proceed further with my speech, I would like to raise one matter with the right hon. Gentleman. It has just been put to me. What is the position of the Chairman and Deputy Chairmen of Ways and Means who are not mentioned either in the Bill or in the Motions?25

In his closing speech, David Howell, the Parliamentary Secretary to the Civil Service Department, responded to Mr Peart’s concern:

The right hon. Member for asked about the Chairman and Deputy Chairmen of Ways and Means. They are paid on the House of Commons Vote, as Officers of the House; the House of Commons Offices Commission authorises the payment and will arrange for the increases on application by you, Mr Speaker.26

Despite the passing of the House of Commons (Administration) Act in 1978, this position has not changed materially.

24 HL Deb 17 June 2008 ccGC385-386 25 HC Deb 20 December 1971 c1144 26 HC Deb 20 December 1971 c1243 Appendix: Draft Ministerial and other Salaries Order 2008 and Explanatory Notes

In accordance with section 1B of the Ministerial and other Salaries Act 1975,a a draft of this Order was laid before and approved by a resolution of each House of Parliament. Accordingly, Her Majesty, in exercise of the powers conferred upon Her by section 1B of that Act, is pleased, by and with the advice of Her Privy Council, to order as follows: Citation and commencement 1.—(1) This Order may be cited as the Ministerial and other Salaries Order 2008. (2) This Order comes into force on the day after the day on which it is made.

Increases in salaries under the 1975 Act 2.—(1) The annual amount, or the maximum and minimum annual amount, of any salary payable under section 1(1), (3) or (3A) of the Ministerial and other Salaries Act 1975 (“the 1975 Act”) is— (a) increased, with effect from the start of 1st April 2007, by 0.84% of the amount as it stood on 31st March 2007, and (b) further increased, with effect from the start of 1st November 2007, by 1.06% of the amount as it stood on 31st March 2007; and the increases under sub-paragraph (a) are made after the increases under section 1A of the 1975 Act for the year starting with 1st April 2007. (2) Section 1A of the 1975 Act applies for the year starting with 1st April 2008 and subsequent years taking into account the increases under paragraph (1). (3) This Article has effect in relation to the holding by a person of a paid office at a relevant time only if that person is holding that paid office or another paid office when this Order comes into force. (4) For the purposes of paragraph (3)— (a) a person holds a paid office if the person holds an office or position for which the person is being paid a salary under section 1 of the 1975 Act, and (b) “relevant time” means a time on or after 1st April 2007 and before the coming into force of this Order. Clerk of the Privy Council EXPLANATORY NOTE (This note is not part of the Order)

This Order makes provision for increases in the salaries payable under section 1(1), (3) and (3A) of the Ministerial and other Salaries Act 1975 (the 1975 Act) over and above the increases payable by virtue of the uprating formula in section 1A of the 1975 Act. The salaries covered by sections 1(1), (3) and (3A) are those of Ministers, Opposition Leaders and Whips and other office-holders listed in Schedule 1 to the 1975 Act, and the Commons and Lord Speakers. Article 2(1) provides that the annual amount, or where applicable the maximum and minimum amounts, of these salaries are increased, for the financial year 2007-8, by 0.84% with effect from 1st April 2007 and a further 1.06% with effect from 1st November 2007. This is over and above the increase in these amounts resulting from the annual uprating formula in section 1A of the Act. Article 2(2) provides that the increases in these amounts are to be taken into account for the purposes of the calculation of increases in subsequent years under section 1A of the Act. Article 2(3) provides that Article 2 has effect in relation to the holders of a paid office during the period 1st April 2007 to the coming into force of the Order only if that person holds that paid office, or another paid office under section 1 of the 1975 Act, when the Order comes into force. An impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen. a: 1975 c.27. Sections 1A and 1B were inserted by the Ministerial and other Salaries Act 1997 (c.62). Other relevant amendments to the 1975 Act were made by the (Transfer of Functions and Supplementary Provisions) (No. 3) Order 2006 (S.I. 2006/1640).